Christoph Schumacher: Prosperity without equality is nothing to be proud of

The incomes of wealthy New Zealanders have doubled in the two decades since 1985, while the incomes of the poor have ...
123RF

The incomes of wealthy New Zealanders have doubled in the two decades since 1985, while the incomes of the poor have stagnated.

OPINION: New Zealanders, congratulations. You are living in the most prosperous country in the world.

This is according to the oft-cited Legatum Prosperity Index. This should make you very happy if you live in New Zealand and ecstatic if you are the incumbent Prime Minister in an election year.

But before we pat ourselves on our collective backs, let's scratch the surface a little.

New Zealand has one of the most open economies in the world, in fact we are ranked first on the Legatum Open Economy Index too. We foster an entrepreneurial business environment (ranked second in the world), emphasise social capital (ranked first in the world) and we are first again for individual freedom and social tolerance.

READ MORE:
Is NZ inequality going up, or is it just our worry about it?
Your election debate: Politicians and the issues that matter
Widening inequality fuels discontent among New Zealanders
If thing in New Zealand are good, why are we so grumpy?
Do you have a burning question for our politicians?

Based on such a glowing report card, if I hadn't already moved here many years ago I would buy a flight right now.

Research shows that a high level of income inequality will reduce economic performance and eventually lead to social unrest.
PRAZIS/123RF

Research shows that a high level of income inequality will reduce economic performance and eventually lead to social unrest.

On face value, we do look superb – not to mention our proud heritage of egalitarianism. Yet, in the recent Stuff.co.nz/Massey Election Survey of almost 40,000 people, only 33 per cent of respondents believe that New Zealand is a country of equal opportunity and 68 per cent believe that inequality in this country is too high and/or growing fast.

Where has this perception come from? Is it a product of our ever-growing social media networks where we see that everybody else has more than we have? Where the privileged are living life to the Max Key?

We have all heard the phrase that the rich are getting richer and the poor poorer. Yet most economic experts suggest that globalisation and free trade increases efficiency and, since the rising tide lifts all boats, even the poor become richer. So where is the problem?

Well, the rate at which the rich are getting richer is so much faster that the gap between the rich and the poor is increasing by the day – and, by the looks of it, much faster in New Zealand than anywhere else.

Ad Feedback

In 2014, the OECD put New Zealand on top of the list of inequality growth and currently we rank 27 out of 35 countries on the equality of income list.

In numbers this means the incomes of wealthy New Zealanders have doubled in the two decades since 1985, while the incomes of the poor have stagnated. While the top fifth get 40 per cent of after-tax income in this country, the bottom fifth get just eight per cent.

There are two ways you can look at this. If you believe in a free market economy where everybody is in charge of their own destiny, some people will do better than others and those who work harder or smarter deserve more. Twenty-five per cent of the respondents in the Stuff.co.nz/Massey Election Survey feel this way and indicated that most of the poor are not trying hard enough.

However, the majority of people (58 per cent) believe poverty is real and unjust and we don't all start on a level playing field. Some people are disadvantaged from birth, simply by not having the opportunities to prosper due to cultural, health, gender, racial, financial or similar constraints.

So, how did New Zealand go from being a country known for its egalitarianism to a country with higher income inequality than most of the developed world?

The political changes post-1984 surely played their part. It was at that time that New Zealand really started to embrace the idea of a free market economy and cut its top tax rate in half, reduced social welfare, cut funding for education and prioritised capital over workers.

Given that we have just topped the global prosperity rankings, you might argue that it was the right thing to do. A word of caution. Research shows that a high level of income inequality will reduce economic performance and eventually lead to social unrest. People who are disenfranchised don't prosper.

As a country we shouldn't be happy that only a small section of society is enjoying these new heights of prosperity. The solution is not to simply redistribute more from the haves to the have-nots, but to ensure that everybody has a chance to take part in New Zealand's prosperity creation.

So what could we do? New business models in which all employees participate in profit sharing – and not just top management – would help. Globally, there are several companies that have started to do this and they are doing very well.

We could also increase the importance of apprenticeships as a way of offering training and job security. Free education and living wage models are initiatives used around the world with some success.

The measure of a country is not how much wealth it creates, but how well it looks after all its people. So let's not rest on our successes, but re-invigorate that egalitarian spirit.

Christoph Schumacher is a Professor of Economics and Innovation at the Massey Business School.

A partnership between Massey University and Stuff, the Stuff.co.nz/Massey University Election Survey was designed to gauge the mood of the country as we head into the 2017 General Election. Its aim was to provide insights into the issues of importance to New Zealanders and to uncover any underlying concerns around leadership, trust and the political system. While the results are not scientific, a staggering 39,600 people took part. The survey findings will be the starting point for important conversations about the future of New Zealand, and we'll be running a series of stories based on the findings.

 - Stuff

Comments

Ad Feedback
special offers
Auckland

Boy killed by car

Police were called to the scene at 1.20pm

Nine-year-old has died after being hit by a car in a rural area in the Far North.

Ruptured pipeline repaired video

The pipeline will operate at 80 per cent until cleared for full use in the coming  months.

Auckland's ruptured fuel pipeline finally repaired, but pressure won't be at top capacity until next year, officials say.

Dachshunds make a dash gallery video

Lucy keeps an ear out for her heats.

With the election race in its final leg, pooches took their marks for the annual wiener dog derby.

Toll rage continues in the north

Retirees on limited incomes are more likely to be impacted by toll calls in the north (file photo).

Northern residents still smarting over Auckland toll call areas.

Wellington

Wellington pummel Waikato

Sam Lousi scoring for Wellington against Waikato.

Ruthless Lions score five tries to one and pile more misery on Mooloos with dominant display.

Live: Election night

Labour Leader Jacinda Ardern, at home in her slippers, watches the progress of the election on TV surrounded by friends ...

With National well ahead on counting so far, Labour says it expects to do better on special votes. Meanwhile, the Maori Party could be out, and Gareth Morgan's TOP tilt at Parliament looks to have failed.

So far so good for refugees

Electronic pop singer-songwriter Estère.

Small gig in capital apartment part of a global Amnesty International project.

1.24 million vote early

Well over a million people voted early this election.

Over 250,000 people voted on Friday, bringing the advance vote to record levels.

Canterbury

New shops and foodcourt planned

A new foodcourt and seating areas for diners will be added at the southern end of Northlands mall.

Christchurch's Northlands Mall is planning to embark on another extension.

Live: Election night

Labour Leader Jacinda Ardern, at home in her slippers, watches the progress of the election on TV surrounded by friends ...

Labour's Duncan Webb is leading incumbent National MP Nicky Wagner in Christchurch Central.

Revitalised CBD still seen as fragile

Recent store openings on Cashel St, including H&M, Trenery, Country Road and Seed, have brought life to the block.

New shops are drawing people into the CBD, but are the right plans in place to support them?

Woman trapped in burning car

The car crashed into a traffic light pole and flipped upside down at the intersection of Main South Rd and Parker St in ...

Members of a wedding party smashed a window to help console the woman.

Waikato

How the leaders spent election day video

Labour leader Jacinda Ardern and her partner Clarke Gayford spent the day painting the fence of their Pt Chevalier house ...

As Kiwis went to the polls, candidates voted, relaxed, and did a bit of DIY at home.

Live: Election night

Labour Leader Jacinda Ardern, at home in her slippers, watches the progress of the election on TV surrounded by friends ...

Follow the live blog of who's in and who's out of the Beehive.

Papa's nervous wait

Hauraki-Waikato electorate candidate hui spent the day at The Base. (File)

It's been a laid back day but now the nerves will build in Hauraki-Waikato electorate.

1.24 million vote early

Well over a million people voted early this election.

Over 250,000 people voted on the last day of early voting, bringing the advance vote to record breaking levels.

Taranaki

End of era for library CDs

New Plymouth's Puke Ariki library is selling its entire CD collection due to a downturn in borrowing.

With more music lovers turning to online streaming, a New Plymouth library sells its CDs.

Young happy with vote trend

New Plymouth National candidate Jonathan Young

National's Jonathan Young is leading New Plymouth

Māori hope Howie Tamati trails

Maori Party candidate Howie Tamati

Touted as a possible kingmaker before the election, Howie Tamati trails in his electorate, as Māori Party faces possible oblivion.

1.24 million vote early

Well over a million people voted early this election.

Over 250,000 people voted on the last day of early voting, bringing the advance vote to record breaking levels.

Manawatu

Live: Election night

Labour Leader Jacinda Ardern, at home in her slippers, watches the progress of the election on TV surrounded by friends ...

National holding a comfortable 10 per cent lead on Labour. 

Election 2017: Palmerston North

Labour MP Iain Lees-Galloway will be hoping to win Palmerston North for his party for the fourth time.

Can Labour MP Iain Lees-Galloway make it four in a row in Palmerston North?

Rangitīkei incumbent holding firm

Ian McKelvie is the National candidate for the Rangītikei electorate.

National candidate Ian McKelvie has a dominent lead over his Labour challenger.

Guy leading in Ōtaki

National MP Nathan Guy is looking for a fourth win in the Ōtaki electorate.

National's Nathan Guy is looking likely to take out the Ōtaki electorate.

Nelson

Close race tipped in Nelson

05092017 NEWS PHOTO BRADEN FASTIER / STUFF
Nelson MP Nick Smith at his election campaign launch party at the Trafalgar ...

Three Nelson candidates give their verdicts on the campaign.

Live: Nelson Tasman Election 2017

Tonight we find out who will win our local electorate seats.

Join us for live coverage of the 2017 election results.

O'Connor 'cautiously optimistic'

West Coast-Tasman MP Damien O'Connor says he wants to secure the seat again.

Two West Coast-Tasman candidates give their verdicts on the campaign.

Death of a gentleman

Ron Brinsdon, pictured in 2005, on his dawn can collection run in Hardy St. He and a friend would flatten the cans and ...

Homeless man Ron Brinsdon died after collapsing in Nelson. Behind the familiar face was a hidden story.

Marlborough

Live: Election night

Labour Leader Jacinda Ardern, at home in her slippers, watches the progress of the election on TV surrounded by friends ...

With National well ahead on counting so far, Labour says it expects to do better on special votes. Meanwhile, the Maori Party could be out, and Gareth Morgan's TOP tilt at Parliament looks to have failed.

Early results for Kaikōura electorate

Kaikōura electorate candidates at the first public meeting at St Christopher's Anglican Church, from left, National's ...

It's a closer race than last time - but one candidate is pulling ahead.

1.24 million vote early

Well over a million people voted early this election.

Over 250,000 people voted on the last day of early voting, bringing the advance vote to record breaking levels.

Electorate races to watch

The battle for Northland could prove pivotal if NZ First struggle to make five per cent of the party vote. NZ First's ...

Follow the latest from the 12 closest and most-intriguing electorate races.

South Canterbury

Falloon on the brink

Green Party candidate Mojo Mathers watches the first results come in with members of her campaign team, from left, Ray ...

National's Andrew Falloon was set to win the Rangitata seat on Saturday evening.

Hydro 'dangerous'

Timaru's Hydro Grand Hotel has been assessed as being a dangerous building likely to cause injury or death.

Damning report says Hydro Grand is dangerous, likely to cause injury or death.

Time to spring forward

Butcher Jim Bower's early mornings will be even darker and busier when Daylight Saving kicks in on Sunday.

Dust off the barbecue, it's time for long evenings as Daylight Savings starts.

Gully change approved

An aerial view of Broughs Gully, in the Timaru suburb of Oceanview.

The Brough's Gully site could yield at least 180 sections if the decision survives appeal.

Otago

Revealing ancient and heavenly stories at Cardrona

Cardrona astronomy guide Alex Thom peers through Cardrona's new telescope.

Cardrona Alpine Resort is reaching for the skies with its new visitor attraction.

Flames beat back rescuers

The fire was in one unit in a block of four.

Neighbours reportedly tried to rescue the occupant of a Dunedin flat where a person died overnight.

Woman rescued, police thank app

A Christchurch woman was found on Ben Lomond, near Queenstown, about 12am on Friday.

A Christchurch woman was rescued from a Queenstown mountain after her husband tracked her location through a phone app.

Eyes to the sky in Alexandra

Neil Sutherland, who lives at the Alexandra Airport at his hanger, will be displaying his home-built plane at the Wings ...

It's not every day planes down the main street of Alexandra.

Southland

Live: Election night

Labour Leader Jacinda Ardern, at home in her slippers, watches the progress of the election on TV surrounded by friends ...

With National well ahead on counting so far, Labour says it expects to do better on special votes. Meanwhile, the Maori Party could be out, and Gareth Morgan's TOP tilt at Parliament looks to have failed.

The south votes

Follow the results of the Invercargill and Clutha-Southland electorates

Where is Amber-Lee?

Amber-Lee Cruickshank, pictured age one, went missing on October 17, 1992.

Police travelled to Australia looking for answers about what happened to toddler Amber-Lee Cruickshank 25 years ago.

Prendergast wants dialogue before ministerial review

John Prendergast, former chief executive of the Community Trust of Southland.

"An independent set of eyes transparently reviewing and reporting publicly on this matter would be very beneficial ..."

Ad Feedback